Today, for the first time ever, the National Bank of Ukraine has sold foreign currency through FX intervention conducted in the form of a request for best quotation envisaged by the NBU Foreign Exchange Market Intervention Strategy for 2016-2020.
The National Bank of Ukraine conducted FX intervention in the form of a request for best quotation to smooth out excessive exchange rate fluctuations triggered by temporary factors. Up to UAH 10 million was offered for sale through FX intervention. The weighted average exchange rate at which the intervention was conducted stood at UAH 27.687 per USD 1.
“The FX intervention conducted in the form of best quotation has proved successful in preventing the hryvnia from losing ground and Friday's trading session closed at UAH 27.60/27.70 per USD 1,” said Director of the NBU Open Market Operations Department Mr Serhii Ponomarenko.
Given that the FX intervention conducted in the form of best quotation has proved its efficiency, the NBU intends to continue using this istrument, if necessary, to smooth out excessive exchange rate fluctuations. In the meantime, the NBU will continue to conduct FX interventions in the form of FX auctions. Ukraine’s international reserves amounted to USD 15.5 billion as of the beginning of January 2017. This amount is sufficient for conducting foreign exchange sale interventions and enabling the NBU and the Government to settle their foreign debt obligations.
Since the beginning of 2017, the NBU has sold a total of USD 70.1 million, including the amount sold through today’s auction, to prevent excessive exchange rate volatility.
As a side note, the intervention in the form of a request for best quotation is performed as follows. First, the NBU requests banks to quote buying and selling prices for foreign currency through Bloomberg and Reuters trading information systems. After receiving bids from banks, the NBU enters into an agreement with the bank that has quoted the best price.
The list of banks eligible to participate in the FX intervention to be conducted in the form of a request for best quotation in Q1 2017 was published in early January 2017.